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Property Buyer’s Guide (6)

Notice: Rimontgó recommend specialist advice, not only in legal and juridical aspects, but also fiscal and other areas related to the real estate sector. To that effect, our clients may get in contact with us if they want to ask for our database of professionals who can offer them personal care.

Taxes and fiscal treatment for property owners

TAXATION FOR PROPERTY OWNERS

1. If the owner of the property is a resident individual taxpayer

1.1 Taxation on Personal Income Tax (hereinafter IRPF).

1.2 Wealth Tax.

1.3 Taxation on Property Tax.

2. If the owner of the property is a non-resident individual taxpayer

2.1 Non-Residents Income Tax.

2.2 Wealth Tax.

2.3 Taxation on Property Tax.


1. TAXATION FOR PROPERTY OWNERS

During the time that you own a property in Spain, you will need to comply with the several tax obligations linked to the property. Here you can find some information to bear in mind in respect of the ownership of property depending on the condition of the owner.

1.1 If the owner of the property is a resident individual taxpayer.

1.1.1Taxation on Personal Income Tax (hereinafter IRPF).

The concept of principal residence is key in the definition of the obligations linked to the property, as regulated by the IRPF Law.

As rules the IRPF Law, principal residence is understood as any building which is used by the taxpayer as his/her residence for a period of time of at least three years, and additionally the taxpayer is obliged to effectively move to such property and on a permanent basis within a delay which should not exceed 12 months, to count from the date of the purchase or the date when the works were terminated.
The use of a principal residence does not generate any type of income. In the contrary, in certain cases the purchase can result in a deduction.

If the purchased property is not used as principal residence, the aforementioned deduction will not possible. Thus, the Law rules that all urban state which is not used as commercial premises nor generate a return, will tax for a 2% of the cadastral value (1.1% if the cadastral value has not been reviewed after 1st January 1994). In this case income taxes in a general scale.

Deduction deriving from the purchase of the taxpayer’s principal residence: According to the current regulations, any investment carried out until the 31th of December of 2012 aiming to the purchase or refurbishment of the taxpayer’s principal residence results in a deduction in terms of IRPF, for both the invested capital and the paid interest, in the event of a mortgage contract being drawn up.

It is possible to deduct from the gross tax payable a 15% of all payments done for the purchase within the same tax year, on the basis of a minimum income of 9,015.18 €.

¿What happens with any amounts deducted by the purchase of previous principal residences?

It will not be possible to deduct any amount before the amounts previously paid are exceeded.

How is the reinvestment in the principal residence considered?

If the transfer of a previous principal residence results in capital gains, the value of capital gains will not tax when the total amount obtained is reinvested in the purchase of a new principal residence within 2 years time from the date of such transfer.

If it is partially reinvested, only the amount which is reinvested will be exempt.

Likewise, it is also possible to benefit from deduction when a previous property is sold after the purchase of a new property and capital gains are reinvested in the purchase of the new property within 2 years time from the date of the purchase of the new property.

If you purchase a new property and you do not sell your previous property, the deduction on the new property is not possible until the invested amount in the new property exceeds the amount invested in the previous object of deduction.

If you have already benefit from deduction by the purchase of a previous principal residence, deduction on the new property is not possible until the invested amount in the new property exceeds the amount invested in the previous object of deduction.

1.1.2 Wealth Tax.

All resident individual taxpayers are liable to Wealth Tax. The Taxable income is the value of all your assets wherever they are located as at 31st December of every year.

When purchasing state, you will be liable to the greater of the following:

– purchase value.
– cadastral value.
– the value checked by the Administration.

In the Valencian Community there is a minimum value which is exempt from Wealth Tax (600,000 euros) and the applicable rate ranges 0.25-3.12%.

a) 1% in general terms.
b) 0.1% for the first title deed of a property used as principal residence.
c) 2% in the cases where remission of exemption to VAT has been filed.

1.1.3 Taxation on Property Tax.

The Property Tax (hereinafter IBI), is a local tax which is levied on all Spanish properties.

All property owners are obliged to pay this tax by 1st January each year, at the time this is accrued.

In outline, the amount of this tax is calculated by reference to the official value of the property (cadastral value), and every Town Hall stipulates an applicable tax rate to such value. Nevertheless, the maximum tax rate can not exceed 1.17% of the property’s value in the case of urban state and 1.11% in the case of rural state.

1.2 If the owner of the property is a non-resident individual taxpayer.

1.2.1Non-Residents Income Tax.

If the owner of the property is a non-resident taxpayer, the Law rules that the state will tax for a 2% of the cadastral value (1.1% if the cadastral value has not been reviewed after 1st January 1994). In this case the aplicable tax rate will be:

– non-residents in Spain but residents in EU member countries: 19%.

– non-residents in Spain neither residents in EU member countries: 24%.

1.2.2 Wealth Tax.

All non-resident individual taxpayers are liable to Wealth Tax. The Taxable income is the value of all your assets wherever they are located as at 31st December of every year.
When purchasing state, you will be liable to the greater of the following:

– purchase value.
– cadastral value.
– the value checked by the Administration.

1.2.3 Taxation on Property Tax.

As aforementioned, the Property Tax (hereinafter IBI), is a local tax which is levied on all Spanish properties.

All property owners are obliged to pay this tax by 1st January each year, at the time this is accrued.

In outline, the amount of this tax is calculated by reference to the official value of the property (cadastral value), and every Town Hall stipulates an applicable tax rate to such value. Nevertheless, the maximum tax rate can not exceed 1.17% of the property’s value in the case of urban state and 1.11% in the case of rural state.

Chapters: 12345 – 6 – 7

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